Budget: £2k NI allowance

[minstrel]

And I guess you need to make allowance for savings/other income too?
If you pay salary up to £10K and forget about, say £1000 interest or something then you're going to end up paying NI PLUS tax on the £1000.

Yes - other income will definitely have an effect, so need to take it into account.

[kingcook]

Alan - can you please share how you work out the £7,696 figure for 2013/14?

I worked it out as £7,752 (£646 x 12).

Primary threshold £149 * 52 weeks = £7,748

£7,748 / 12 = £645.67. Round it up to £646 as the NI tables seem to allow it.

You need to look at the Secondary Threshold (ST) on HMRC documentation, not the Primary (PT)

[minstrel]

You need to look at the Secondary Threshold (ST) on HMRC documentation, not the Primary (PT)

But Employer NI is 13.8% on salary between the ST and the PT.

13.8% Employer NI is less than 20% CT, so surely it's "optimal" to pay up to the PT?

[kingcook]

But Employer NI is 13.8% on salary between the ST and the PT.

13.8% Employer NI is less than 20% CT, so surely it's "optimal" to pay up to the PT?

That is correct, but there has been argument that the admin is not worth it. Can't recall the exact amounts, but it was peanuts. We're talking literally a few quid.

[Nixon Williams]

Alan - can you please share how you work out the £7,696 figure for 2013/14?

I worked it out as £7,752 (£646 x 12).

Primary threshold £149 * 52 weeks = £7,748

£7,748 / 12 = £645.67. Round it up to £646 as the NI tables seem to allow it.

A salary of £7,696 is the level at which no income tax nor any national insurance is payable.

A salary of £7,748 will still exempt you from employees NIC but you would then start to pay employer's NIC.

Sadly, we now have three different levels at which the three taxes on employed income starts, so employee NIC is payable when the annual salary exceeds £7,748, employer's NIC is payable when the salary exceeds £7,696 and income tax is payable when the salary exceeds £9,440!

These are all based on 2013/14 rates and assumes normal working age, as the figures will be different if you are at retirement age.

[LisaContractorUmbrella]

Before everyone gets too excited about their rebate:

"1. National Insurance: £2,000 employment allowance
The Government will introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 secondary NICs liability from April 2014. The allowance will be claimed as part of the normal payroll process through Real Time Information (RTI). The Government will engage with stakeholders on the implementation of the measure after the Budget and is seeking to introduce legislation later in the year.

They haven't legislated yet. In fact, by the sound of it, they don't seem sure how they're going to deal with it

[psychocandy]

A salary of £7,696 is the level at which no income tax nor any national insurance is payable.

A salary of £7,748 will still exempt you from employees NIC but you would then start to pay employer's NIC.

Sadly, we now have three different levels at which the three taxes on employed income starts, so employee NIC is payable when the annual salary exceeds £7,748, employer's NIC is payable when the salary exceeds £7,696 and income tax is payable when the salary exceeds £9,440!

These are all based on 2013/14 rates and assumes normal working age, as the figures will be different if you are at retirement age.

So you could pay yourself £52 a year more and pay no more tax and just pay employers NI of 13.2%?

£52 paying 20% CT = £10.60
£52 paying 13.8% NI = £7.17

LOL. There we go govenment thats £3.43 in voluntary taxes I'll pay so stop moaning. :-)

[minstrel]

A salary of £7,696 is the level at which no income tax nor any national insurance is payable.

A salary of £7,748 will still exempt you from employees NIC but you would then start to pay employer's NIC.

Sadly, we now have three different levels at which the three taxes on employed income starts, so employee NIC is payable when the annual salary exceeds £7,748, employer's NIC is payable when the salary exceeds £7,696 and income tax is payable when the salary exceeds £9,440!

These are all based on 2013/14 rates and assumes normal working age, as the figures will be different if you are at retirement age.

Thanks for clarifying Alan.

It looks like £7,748 is possibly optimal from a purely mathematical perspective, but the amounts are trivial for 2013/14, so it's potentially optimal from an admin perspective to pay £7,696.

[Kugel]

It looks like £7,748 is possibly optimal from a purely mathematical perspective, but the amounts are trivial for 2013/14, so it's potentially optimal from an admin perspective to pay £7,696.

From admin perspective it is almost the same. In Q4 you pay NIC instead of notifying HMRC that no payment is due.